RBI permits one-time restructuring of stressed MSME loans

Lenders to make additional provision of 5% above provisions already held for accounts restructured under scheme

The Reserve Bank of India has decided to permit a one-time restructuring of existing stressed loans to Micro, Small and Medium Enterprises (MSMEs) that are in default but standard as on 1 January 2019, without an asset classification downgrade.

To be eligible for the scheme, the aggregate exposure, including non-fund based facilities of banks and NBFCs, to a borrower should not exceed Rs 25 crore as on 1 January 2019. The restructuring has to be implemented by 31 March 2020. A provision of 5% in addition to the provisions already held, shall be made in respect of accounts restructured under this scheme.

Each bank/NBFC should formulate a policy for this scheme with Board approval which shall, inter alia, include framework for viability assessment of the stressed accounts and regular monitoring of the restructured accounts.

The move is aimed at creating an enabling environment for the sector, considering importance of MSMEs as an important component of the Indian economy and contributing significantly to the country's GDP, exports, industrial output, employment generation etc.

The issue of restructuring of MSME accounts was discussed in the meeting of the Central Board of RBI on 19 November 2018. The matter was also discussed during RBI's recent interactions with the banks and other stakeholders.

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